tier 1 (investor) visasan introduction

the small business, enterprise and employment act

an introduction

The small business enterprise and employment act 2015 (“SBEE”) is being implemented during 2016, bringing about far-reaching changes to UK company law.

A number of its provisions are aimed at enhancing the transparency

around UK companies and LLPs, as well as increasing trust in the

UK generally as a place to do business and invest. The provisions of

the SBEE are coming into effect in stages during 2016. To help you

navigate these changes, we have outlined:

• What the key changes are.

• When they come into effect.

• What action you need to take.

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Key questions for you to consider…• Are all your shareholders or members the true beneficial owners?

• Are there people other than your shareholders or members who have significant influence or control of your company or LLP?

• Do your shareholders or members hold their interests through nominee trust structures?

• Are all your directors natural persons?

• Do you have any bearer shares?

If you have answered yes or are not sure about the answers to any of the above questions, then the SBEE will affect you and you need to take action in response to this. Failing to comply to some of the provisions is an offence and shareholders may face sanctions including loss of voting rights and dividends.

Key changes

DATE CHANGE

May 2015 • Bearer shares abolished.

October 2015 • Director information at Companies House.

April 2016 • Register of persons with significant control.

• Registered office.

• Directors’ disqualification.

June 2016 • Central registry.

• Abolition of annual returns.

October 2016 • Abolition of corporate directors.

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DATE CHANGE EXPLANATION IN BRIEF ACTION (IF ANY)

26 May 2015 Bearer shares abolished. The issue of new bearer shares is prohibited. Companies had until 26 February 2016 to convert existing bearer shares to ordinary shares in their capital.

• Apply to court to cancel outstanding bearer shares.

• Amend articles of association to remove bearer shares provisions.

October 2015 Director information at Companies House.

Notification of new director appointments to Companies House will need to disclose only the month and year of birth on public records to provide increased protection for directors from identity theft. No “consent to act” is required to be signed by a director when filing at Companies House.

To be noted.

6 April 2016 Register of persons with significant control.

• Broadly unlisted UK companies must create and maintain a publicly available register (the “PSC Register”) of beneficial ownership for individuals or legal entities with significant control (“PSCs” and “RLEs” respectively). Failure to comply is a criminal offence.

• Most private companies and LLPs will need to take action. Particular care will need to be taken if there are nominee shareholdings and/or trust shareholders in your company.

• Details of the following persons (legal entities or natural persons) must be included on the company’s/LLP’s PSC Register:

• persons who own or control more than 25% of nominal value of the shares/voting rights in the company or, in the case of LLP’s, have the right to share in more than 25% of the LLP’s surplus assets on a winding up or have more than 25% of the voting rights;

• persons who are entitled to appoint or remove a majority of the board of directors of a company or, in the case of an LLP, a majority of persons entitled to take part in an LLP’s management;

• persons who have the right to exercise significant influence or control over the company or LLP; and

• are the trustees of a trust or the members of a firm that is not a legal person and who meet one or more of conditions set out above (or would do if they were individuals) and such person exercises or has the right to exercise significant influence or control over the activities of that trust or firm.

View the draft guidance produced by the Business, Innovation and Skills department at www.gov.uk.

Timeline of key changes

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DATE CHANGE EXPLANATION IN BRIEF ACTION (IF ANY)

April 2016 Registered office. Companies House will have authority to change a registered office if there is a valid complaint that the company does not have the right to use that address.

To be noted.

April 2016 Directors’ disqualification.

The disqualification regime under the Company Directors Disqualification Act 1986 has been expanded to include reference to directors’ conduct in connection with the formation and management of overseas companies.

To be noted.

30 June 2016 (anticipated)

Abolition of annual returns.

After this date, annual returns will be replaced by “annual confirmation statements” to be submitted to Companies House once in every 12 month period. These statements will include information from the PSC Register.

To be noted.

June 2016 (anticipated)

Central registry. Subject to shareholder approval, private companies will be able to elect to have their registers of members, PSC Register and register of directors/secretaries maintained by Companies House.

Consider whether this is appropriate for your company.

October 2016 (anticipated)

Abolition of corporate directors.

All directors must be natural persons, not corporate directors. After one year, all corporate directorships will automatically terminate unless an application for exemption is successful. Proposed exemptions include quoted companies, AIM companies, some very large private companies in group structures and charitable companies.

• If there are corporate directors, check the company’s articles of association to understand the effect of the cessation of corporate directorships.

• Take advice as to exemptions.

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The regime for registered people with significant control “PSCs” – Howard Kennedy update

Dates of implementation• From 6 April 2016 most UK companies and LLPs must keep and maintain a PSC Register.

• From 30 June 2016 onwards, this information will need to be delivered to the central public register at Companies House (when incorporating a new company or LLP or, in case of an existing company or LLP, when the next confirmation statement is due to be filed at Companies House).

A summary of stepsWhat you need to do:

1. Take reasonable steps to identify if there are individuals or entities that have significant influence or control (the “Conditions”) over a company or LLP for which you are involved. Examples about what may constitute significant influence or control are set out below.

2. Contact these people to confirm if they meet one or more of the Conditions and get the relevant information to be included on the PSC Register.

3. Put a PSC/RLE’s information on your company/LLP’s own PSC Register, if in the case of individuals, it has been confirmed or if, in the case of entities, it is complete and accurate.

4. From 30 June 2016 file the relevant information at Companies House, when applicable.

5. Continually monitor and keep that information up to date.

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Who are your PSCs/RLEs?

For a company

A person1 who meets one or more of the following conditions:

Action

Directly or indirectly owning more than 25% of the nominal value of the shares.

Review register of shareholders, articles of association, statement of capital and nominee or trust arrangements.

Directly or indirectly holding more than 25% of the voting rights.

Review register of shareholders, articles of association, shareholders agreements and consider whether voting patterns suggest some parties are acting together (for example, members of the same family).

Directly or indirectly holding the right to appoint or remove the majority of the board of directors.

Review any provisions in the articles of association or other shareholders’ agreements.

Otherwise having the right to exercise, or actually exercising significant influence or control.

Consider whether any person has significant influence or control, irrespective of a formal role. (see below)

Holding the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the above conditions if it were an individual.

Consider whether anyone who meets any of the above conditions is a trust or firm. If so, does anyone have significant influence or control over the activities of that trust or firm. (see below)

1 A person can be an individual, company or an LLP.

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Who are your PSCs/RLEs?

For an LLP

A person1 who meets one or more of the following conditions:

Action

Directly or indirectly holding rights over more than 25% of the surplus assets on a winding up.

Review your LLP agreement (written, verbal, implied) or any other relevant agreements. If there is no agreement regarding rights to surplus assets on winding up, each member is deemed to have an equal right.

Directly or indirectly holding more than 25% of the voting rights.

Review your LLP agreement (written, verbal, implied) or any other relevant agreements, consider voting patterns suggest some parties are acting together (for example members of the same family).

Directly or indirectly holding the right to appoint or remove the majority of those involved in management.

Review LLP agreement (written, verbal, implied) or any other relevant agreements.

Otherwise having the right to exercise, or actually exercising significant influence or control.

Consider whether any person has significant influence or control, irrespective of a formal role. (see below)

Holding the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the above conditions if it were an individual.

Consider whether anyone who meets any of the above conditions is a trust or firm. If so, does anyone have significant influence or control over the activities of that trust or firm. (see below)

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What is significant influence or control?

Examples of where a person has the RIGHT to exercise significant influence or control

Examples of where a person ACTUALLY exercises significant influence or control

None-exhaustive list of “excepted roles”

Where a person has absolute decision rights or veto rights over decisions related to the running of the business of the company or LLP, for example:

• adopting or amending the company or LLP’s business plan;

• changing the nature of the company or LLP’s business; and/or

• making additional borrowing from lenders.

However, if a person holds absolute veto rights for the purpose of protecting minority interests in a company (for example on a venture capital deal) then this is unlikely to constitute significant influence or control on its own. When used for the purposes of protecting minority interests, these veto rights could therefore include changing the company’s constitution or the dilution of shares or rights.

A person would not have significant influence or control where the absolute decision rights or veto derive solely from being a prospective vendor or purchaser in relation to a company for a temporary period of time (for example on an exit transaction).

• Where a person who has relations with a company and/or its shareholders and directors and LLP and/or its members and the cumulative effect of those relationships places the person in a position where they actually exercise significant influence or control. For example, where a director who also owns important assets or has key relationships that are important to the running of the business (for example, intellectual property rights), and uses this additional power to influence the outcome of decisions related to the running of the business.

• A person who is significantly involved in the management and direction of a company or LLP. For example:

• a person, who is not a member of an LLP or director of a company, regularly or consistently directs or influences a significant section of the directors or members, or is regularly consulted on their decisions; or

• a person who’s recommendations are always or almost always followed by shareholders of a company or members of an LLP who, in each case, hold the majority of voting rights in that Company or LLP.

• Those persons who provide advice in a professional capacity, for example: lawyers; accountants; and investment managers.

• Where a person has a third party commercial or financial arrangement with the company, for example, as a lender, supplier or customer.

• Where a person exercises a function under an enactment, for example, as a regulator or liquidator.

• Where a person is an employee acting in the course of their employment.

• A person who makes recommendations to shareholders of a company or members of an LLP on an issue, or set of issues, on a one-off occasion, which is subject to a vote.

• If influence is exercised simply by virtue of being a director of a company or designated member of an LLP.

This material is for general information only and is not intended to provide legal advice. 9

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For more information, please contact:

Michael HarrisPartner: Head of M&AT: +44 (0)20 3755 5488E: michael.harris@howardkennedy.com

© Howard Kennedy LLP 2016